Non-admission of liability: Overview, definition, and example
What is non-admission of liability?
Non-admission of liability is a legal concept where a party involved in a dispute agrees to settle or resolve a matter without admitting fault or responsibility for the claims made against them. This clause is often included in settlement agreements or dispute resolutions to allow one party to avoid an admission of liability while still resolving the matter, typically through a financial settlement or other actions.
For example, a company may settle a lawsuit with a customer but include a non-admission of liability clause to make it clear that the settlement is not an acknowledgment of any wrongdoing or legal responsibility.
Why is non-admission of liability important?
Non-admission of liability is important because it protects the party from future claims or legal implications. By agreeing to settle a case without admitting liability, a party can avoid setting a precedent that might affect their position in future disputes or encourage further claims. It also helps preserve reputations, as admitting fault can have lasting consequences on a company or individual's standing in the industry or public eye.
For businesses, including non-admission of liability clauses in contracts and settlements helps maintain flexibility in managing legal risks and shields them from admitting fault that could have broader legal or financial consequences.
Understanding non-admission of liability through an example
A supplier enters into a settlement agreement with a customer who claims the products were defective. The supplier does not want to admit fault but agrees to compensate the customer to resolve the issue and avoid a prolonged lawsuit. In the agreement, the supplier includes a non-admission of liability clause, stating that the settlement is not an acknowledgment of any defect or breach of contract.
In another case, a company involved in a workplace injury dispute with an employee agrees to a financial settlement but ensures that the settlement does not imply the company is responsible for the injury. The settlement includes a non-admission of liability clause to avoid establishing legal precedent for future cases.
An example of a non-admission of liability clause
Here’s how this type of clause might appear in a settlement agreement:
“The Parties agree that the settlement payment made hereunder shall not be construed as an admission of liability by [Party Name]. Each Party expressly denies any liability or wrongdoing, and this Agreement is entered into solely for the purpose of resolving the dispute without further litigation.”
Conclusion
A non-admission of liability clause allows parties to settle disputes without admitting fault or responsibility, thus protecting them from future legal risks and reputational damage. This clause is particularly useful in commercial and legal settlements, providing a way to resolve issues efficiently while avoiding the long-term consequences of admitting liability.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.